Everybody loves the idea of the self-sufficient farmer — hardy, independent, working his own land to produce what he needs on his own terms. It is a romantic vision, unless you have the experience of having lived that way: In the modern parlance, we call that economic model “subsistence agriculture,” and it is associated with places like Afghanistan and Uganda, a neolithic standard of living, and intervals of famine.
But the nice thing about having a primitive economy is that the economics gets real simple real quick. Let’s say you live in Grainville, population 100, a village of self-sufficient corn farmers who among them produce 1,000 bushels of corn every year. Corn farming is their only form of organized economic activity — otherwise, they are reduced to foraging in the countryside in old-fashioned hunter-gatherer style. If they lack trade or economic diversification, we know precisely how much the people of Cornville can consume in any given year: exactly what they produce, i.e., 1,000 bushels of corn. In order to make the math easy, let’s say that Grainville’s corn consumption follows the same pattern every year: 800 bushels eaten, 200 bushels used as seed for the next year’s crop, producing the same 1,000 bushels for the next season. Over and over.
The same pattern holds true at Corntown, the nearly identical village down the road. They put 800 bushels in the granary and 200 bushels in the seed silo. On and on it goes, for generations, until one year somebody in Corntown gets a big idea: 1,000 bushels of corn minus the 200 needed for seed leaves eight bushels per person per year, which is by no means a lavish standard of living, but they know from bad crop years that they can, if absolutely necessary, live on a little less — 7.5 bushels per person per year is enough to get by, if only barely. So why not put 750 bushels in the granary and 250 in the seed silo? It would be a very lean year, but with a little luck, and perhaps a milder winter, they would have an extra 50 bushels of seed corn the next planting season.
People grumble when stomachs rumble. But when the next harvest comes around, Corntown is, if not exactly fat and happy, better off: Instead of 1,000 bushels of corn, they have 1,250—a better harvest than anybody can remember having seen. But this bumper crop brings with it a heated debate among the yeomen of the Corntown Growers’ Cooperative. Yeoman Smith says that they should declare a festival year, set aside the usual 200 bushels for seed, and distribute the remaining 1,050, giving everybody 10.5 bushels instead of the usual eight. Yeoman Jones says that they should return to their usual practice of putting 800 bushels in the granary and set aside the remaining 450 for seed, producing an even bigger crop next time around. And Yeoman Flint proposes an even more radical idea: Tough out one more year of putting only 750 bushels in the granary and set aside 500 bushels for seed. Nobody much likes Yeoman Flint’s proposal: The past year was pretty tough, and another year like it might lead to serious discontent in Corntown. But Yeoman Flint has a compelling argument: If the winter is especially tough or there is another unforeseen need, that corn sitting in the seed silo is still there for them — they could always eat some of the extra seed if things proved tough, dipping into their corn savings.
There are three possible scenarios for the next harvest:
1. Under the Smith model, the harvest is 1,000 bushels, back to square one, with the one fat year a fading memory.
2. Under the Jones model, the next harvest is an astounding 2,250 bushels — more than twice what the people of Corntown are used to having.
3. Under the Flint model, the next harvest is 2,500 bushels, a truly mind-boggling harvest for Corntown.
The people of Corntown are mostly moderates. They know a good thing when they see it, but they do not want to go overboard, so the Jones model is the most popular — after all, when you are used to having only 1,000 bushels a year, the difference between 2,250 and 2,500 does not seem that vast. But the Flintists turn out to be hardcore, uncompromising ideologues, and they are not prepared to give way, so 20 of them decide to take their share of the year’s crop — 250 bushels — and go their own way, forming their own cooperative down the road a bit.
So, now we have three corn-farming villages: Grainville follows the Smith plan, planting 200, harvesting 1,000, eating 800 (or eight per person per year), planting 200, etc. Corntown now follows the Jones plan, modified for their new, smaller population: They set aside 640 bushels to eat (eight bushels for each of their 80 remaining residents) and plant the balance, which comes to 360 bushels. And the tiny new village of Flintstown, population 20, sets aside 150 bushels to eat (7.5 bushels per person) and plants its remaining 100.
The next year, then, the harvest looks like this:
1. Grainville: 10 bushels/person
2. Corntown: 22.5 bushels/person
3. Flintstown: 25 bushels/person
People start to think of Grainville as kind of déclassé: With a per capita GVP (Gross Village Product) of only ten bushels, it is by far the poorest of the three villages. But almost nobody from Corntown is looking to move to Flintstown, either: Even though its GVP is slightly higher, life is kind of hard there, and its current standard of living — as measured by how much corn you get to eat — is slightly lower. The people of Corntown congratulate themselves on their moderation. The people of Flintstown come to think of the people of Corntown as high-living libertines. Which brings us to:
Year Two Per Capita GVP
Grainville: 10B (0.00 growth rate)
Corntown: 72.5B (322 percent growth rate)
Flintstown: 87.5B (350 percent growth rate)
Discovering the power of investment — forgoing a little consumption now in order to produce more in the future — was a powerful thing, indeed. Both corn-investing villages now are producing far more seed corn than corn to eat. But of course that kind of spectacular growth cannot last forever. There’s only so much land and water, only so many laborers — and only so much corn, cornmeal mush, hoecakes, and unsalted popcorn you can stomach. (Neither village has made contact with the far-flung communities of Pigtown, Cowtown, Avocadoville, or Tomatoburg yet.) And even with its higher level of investment, Flintstown’s growth rate is not going to be 8 percent higher than Corntown’s forever. But it will be higher.
After the initial boom, Corntown levels out at 6 percent growth, and thrifty Flintstown at 7.5 percent in Year Three and going forward. In the coming years, that does not make an earth-shattering difference in their per capita GVPs. In Year Eight, Corntown’s per capita GVP is 97B, while Flintstown’s is 126B. And Flintstown gets a little less flinty: Corn consumption goes up a little bit, meaning that the amount of corn replanted goes down proportionally, and so the difference in their growth rates is diminished, too: Corntown continues growing at 6 percent, and Flintstown, still relatively tight with a bushel, grows at 6.5 percent. That half of a percentage point does not seem like much to brag about — until you check in with the great-grandkids. In Year 100, Corntown’s per capita GVP is 19,481B — but Flintstown’s is a whopping 38,832B, meaning that Yeoman Flint’s great-grandkids are on average twice as wealthy as Yeoman Jones’s. (Grainville, of course, disappeared after the first serious drought. And since Flintstown hasn’t developed a market for domestic laborers, Grainvillians perish from the earth, and nothing is left of them but sad stories.)
And when the corn-investing villages finally get around to establishing trade ties with Pigtown and inventing the tamale, the merchants prefer trading with Flintstown — sure, Corntown is a bigger market, but Flintstown is twice as wealthy, and they can afford to pay more for pork, avocados, beef, cotton — and for farming tools that make their corn operations more efficient, helping them to sustain their growth edge. In Year 200, Flintstown still has only a quarter the population of Corntown, but its economy is equal to 80 percent of that of its neighbor, and its citizens are on average three times wealthier. In another 50 years, Flintstown’s total GVP will be greater than Corntown’s, and its per capita GVP will be four times as much — which is to say, the difference between Flintstown and Cornville will be more than the difference was between either of them and long-forgotten Grainville back in the early days of the corn-investing boom. And Flintstown will have so much capital accumulated that its citizens will have long been able to consume at higher levels than the once-proud residents of Corntown, even while their economy continues to grow at a faster pace.
You can imagine what happens from there. All the trade roads lead to Flintstown, which is home to the best markets. If you want to be an artist or a poet instead of a corn-trader, Flintstown is where you go — it is wealthy enough to support art and high culture. All the most enterprising and energetic residents of other villages dream of a better life in Flintstown. If invaders come from foreign shores, Flintstown has the resources to protect itself. And it has so much corn that it can experiment with new corn-growing techniques; if it loses a little in a bad experiment, nobody is going to starve. Corntown does okay, too, but it will never catch up with Flintstown — not unless it gets more serious about investing or Flintstown lets up.
And all that is possible because the Flintstowners decided, a long time ago, that they could make do with a half-bushel less of corn every year.
There are other ways to get your hands on that seed corn, of course. Perhaps some enterprising investors from another rich village saw an opportunity in Flintstown, admiring the thrifty ways of its residents, and lent them the extra seed corn in exchange for a cut of future harvests. That would work, too, but there is no way of getting around the fact that you can’t plant corn you eat, and you can’t eat corn you plant. Somebody, somewhere, had to consume less corn than they produced to make that growth possible.
And the worst-case scenario is borrowing corn to eat today to be paid back out of future harvests.